The black market of foreign currency is controlling business in Zimbabwe, with nearly all businesses and travellers getting their cash from the illegal market, according to a survey by the Anti-Corruption Trust of Southern Africa (ACT-SA).
The Zimbabwean government had established an interbank market in February this year for foreign currency trade, but the facility was hit by shortages of hard currency.
In the survey named “Government’s failure to restore sanity in the financial sector: A case of illegal money changers,” it is revealed that the travellers and businesses trade their foreign currency on the black markets, even though they know it’s forbidden by the law.
“Considering that 100% of the respondents obtained foreign currency from the black market, a follow-up question, was asked on whether they were aware that buying from the black market was illegal. Again, all the respondents (100%) pointed out that they were fully aware of the illegal nature of transacting at the black market,” ACT-SA announced. “That said, they have no choice since their banks do not give foreign currency. Another follow-up question was asked on why businesses and travelers, among others, prefer buying foreign currency from the black market than banks and bureau de changes.
“This was testified by 50% of the respondents, while another group of respondents feel that there is no paperwork and questions asked at the black market than at local banks and bureau de changes.”
According ACT-SA, one of the reasons why illegal money changers are not being arrested is that the majority of them are linked to politics.
“Regardless of the illegal nature of the black market, the participants are not arrested. The research sought to understand, why there were no arrests against illegal money changers, among other players in the black market,” the report read. “A significant majority (60%) pointed out that illegal money changers are politically connected and, hence, are not being arrested. There are no arrests because of the fact that there is no law outlawing the changing of money in the streets.”
The research also states that the law enforcement officers were partly responsible for the existence of the black market by ignoring the illegal activities.
ACT-SA recommended that the authorities should deal with illegal money changers more strictly and that the local banks should give foreign currency to those who only needed it for international business.
Economist John Robertson said banks should be held accountable in order to get rid of the black market because they were the ones sustaining it.
“The banks have to be disciplined; they are the ones sustaining the black market. Some of the banks are complicit on the issue of foreign currency exchange rates,” he explained. “The black market has become a serious problem causer in this country as it has contributed to the rise in inflation, increases in prices and rise in everyone’s cost of living. It has also caused distortion in tax revenues and has led to reduced investor confidence in the country.”